REVERSING A TREND, ENI EXPECTS TO BOOK AN $800 MILLION LOSS FOR 1992

ENI Group has estimated a loss of $830 million for 1992.

That compares with net profits of $800 million in 1991 and $1.6 billion in 1990.

ENI Manager Giuseppe Facchetti attributed the poor performance in large part to the falling ratings of Italian public companies on international financial markets which placed additional financial burdens on the group.

ENI Chairman Gabriele Cagliari blamed "the general economic slump and the increasing exchange rate of the dollar for lire, while the prices of oil products remained stationary."

EARNINGS FACTORS

Earlier, officials predicted a $160 million loss, but that was based on presumed sales of assets of $150 million in the chemical sector that failed to materialize.

In addition, ENI gas unit Snam was obliged to take a charge to reimburse, under European Community Commission rules, subsidies totaling $320 million for incorporation of a shell company, Lanerossi, an ENI textile unit being liquidated under the group's restructuring.

Another factor expected to squeeze earnings in 1993 is the new state tax on business capital that will be introduced this month.

COMPANY BREAKOUT

Group losses mainly were concentrated in the chemical sector, which was expected to post a loss of $1.44-1.6 billion in 1992, compared with a $1.04 billion loss in 1991.

Most of the losses stem from servicing the chemical group's heavy debt, a current total of $7.2 billion and accumulating at the rate of $1.04 billion/year. In addition, the minerals and the metallurgy companies posted combined losses of $400 million.

The companies that fared best were oil units Agip and Snam and engineering and drilling contractor Saipem, but their profits for the first time were unable to offset losses of other companies of the group, whose sale or shutdown now seems unavoidable.

"There is a dispersion of wealth that can't go on," Cagliari said. "How can we manage 11 operating sectors and 40 operating areas that have accumulated without any strategic logic?"

He also said the objective of ENI should be "to dramatically reduce fixed costs, concentrate production in the most efficient sites-abandoning smaller and obsolete plants-and sell or shut down operations that are noncompetitive, such as agriculture.

"In the end, Enichem will be reshaped in a petrochemical and plastics sector, with activities to be separately listed on the stock exchange, such as fibers, detergents, and elastomers."

ENICHEM RESTRUCTURING

To revive Enichem, a management council headed by ENI's new Managing Director Franco Bernabe recommended last year to recapitalize Enichem with $800 million provided by ENI. The immediate aim is to ease the chemical group's debt burden, cutting its debt to equity ratio to 1.3 from 1.8.

The council also recommended the Enichem holding company directly manage Enichem Anic (olefins and intermediate products), Enichem Polymers, Instituto Donegani (research), and Serchem (services).

Enichem Elastomers and other profitable plastics businesses will be kept separate from the main holding company to be sold later or offered for joint ventures. According to ENI management, Enichem's reorganization should save $200-250 million.

Plans to enter into a polystyrene joint venture with British Petroleum Co. plc have been approved and were expected to be concluded by early 1993. At the same time, Enichem is pursuing a joint venture in polyethylene with interests outside Italy.

Industry observers believe Bernabe's strategy is to split in two the chemical activities of ENI, trying to retain control of Enichem's core businesses of plastics and elastomers, while withdrawing gradually from the less profitable areas such as fertilizers, detergents, specialty chemicals, and fibers.

OVERVIEW

Cagliari estimated the core business of ENI, encompassing oil, gas, and petrochemicals, at a value of $36 billion and the remainder of the massive holding company at $2 billion.

"The cash flow of Agip and Snam can't go on to finance the losses of the other sectors. We need strong investments, and there is a high level of debt. We can't go on scattering our wealth ... Our strategy then should be to renovate, sell or make agreements wherever it's possible and shut down the rest."

Agip Chairman Raffaele Santoro told the Italian press that while ENI would retain control of his company for many years to come, 15% of the shares of Agip could be sold, provided market conditions were good, in the 6 months following ENI approval.

In this case, sales of stock are expected to bring in at least $1.4 billion in capital, half of which is expected from foreign stock exchanges. To prepare for this event, he said, Agip has been adopting for the last 2 years accounting practices of the New York Stock Exchange.